THE DEVELOPMENT OF APPROACHES TOWARDS THE ESSENTIAL CONTRACT TERMS

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The academic article deals with the analysis of the main theoretical (doctrinal) approaches towards the understanding and meaning of the essential contract terms. The crucial influence of Roman private law onto the modern understanding of the essential contact terms has been traced.

Key words: contract, essential contract terms, contract terms, Roman law.

 

Topicality of the study is due to the fact that the contractual relationship in terms of formation and development of market economic system has a great significance, because numerous commercial and civil relations between business entities and other participants in civil and commercial relations are mediated and settled through contracts. It acts as a kind of public control of such relationships, providing proper legal registration of public relations.

This understanding of the essential contract terms also is not established. Firstly, during administrative relations in Soviet times it was reflected in civil law; the essential terms of the contract are sometimes reduced to acts as routine formalities, having not played a decisive role in the emergence of a genuine initiative in the contract agreement. Secondly, in the current discretionary conditions of civil law, there is the view expressed that some essential conditions, even with their uncertainty in the agreement do not affect its validity, and such notions need a careful theoretical analysis. Thirdly, some researchers have recently formed ‘restrictive’, ‘special’ conditions of the agreement because their ratio of essential terms should be investigated in view of taxonomy of contract terms.

Analyzing the legal nature of material contract terms in civil law, it should be noted that the origins of the essential terms of the contract stem from Roman private law, which, admittedly, is the perfect embodiment of private thoughts of ancient people who inhabited the South-Western part of Europe, Middle East and North Africa. Roman private law concentrated systematic foundations of modern civil law regulating social relations of continental legal system. In addition, it should be noted that the fundamental idea of ​​the Roman contract is relevant for the present, because there have been almost no significant changes that have been implemented into the legal systems of most countries due to the reception of Roman private law.

In Roman private law, according to the national academic specialist in the field of contract law, A. Merezhko, the contract had two main features: agreement (conventio, consensus) and the base in a specific purpose (causa). However, in the 18th century, causa, as a necessary element of the contract, no longer existed [9, p. 19]. Therefore, consent of the parties was and has remained the main element (sign) of any contract.

In the paragraph 2 of the title 16 “About Agreements” in the second book of Justinian Code, it was noted that the contract is a match of desires of two or more people, and their agreement. This word has conventio common values ​​and concerns of all things on which those who are in business dealings for the conclusion of the transaction agree [4, p. 102]. It follows that in Roman times, the contract was at least a two-way transaction, so there were certain contractual conditions required for its parties.

Even during the Roman era, private law was considered an essential condition of the contract, especially its subject. Depending on the nature, contract could be subject to its performance as well as a thing (as a material object outside world) [11, p. 103]. The contract subject necessitated two basic requirements, ‘opportunity’ and ‘allowability’. The opportunity was provided that the object exists and can be physically provided. This requirement does not offer any answer, for example, a building that was destroyed by fire. Similarly, this requirement did not meet the promised work, which, under certain conditions, was not possible to perform physically, for example, to build a multiple-storey house one day [3, p. 485]. In modern contract law, demand of capabilities is generally ignored and not separately allocated. Obviously, this is due to the fact that the contract parties are governed by a matter of reasonability set out in Art. 3 of the Civil Code of Ukraine, and therefore do not enter into an agreement with the impossible subject [5, p. 54].

Allowability of contract subject provided that the contract provision should not contradict the law or good will of the parties. This provision remains valid today. So, a human being cannot be the subject of contract because it contradicts the Constitution of Ukraine and current criminal law.

Things as subject of the contract, in Roman law were distinguished as individually identified (species) and defined generic (genus) [11, p. 105]. Depending on the type of things, a different order of execution of contracts and the consequences of their breach was assumed. So, if the object was to provide generic way (genus), it was essential to determine their quantity and quality. In this case, the debtor could make their replacement, and provide lender with the specified number of things. In this case, there could be inability to perform as generic things never die, because in case of loss of ancestral things, it could be replaced by another of the same part.

According to Roman lawyers, the contract of the transfer of things specified by generic features, until the debtor did not give the lender a certain amount of a certain kind of things, it had been unknown what kind of property was to be transferred to the lender. In practical terms, this meant that in the event of loss of tribal things, the debtor did not exempt from execution of his duty on the transfer of things [10, p. 129].

Within the obligation to transfer individually specified items (genus limitatum), the object of the obligation was not anything, but the certain thing, unique to its features. On this occasion, it was mentioned that specifying the name or names of slave or estates deprives the definition of a generic nature contract [3, p. 490].

The legal nature and characteristics of individual contracts affect the the subject, and determine its degree of individualization in the contract. Thus, for each type of agreements specific requirements for determining the degree of individualization of things that was their object were established. So, I. Novitskyi wrote that under the contract the loan was always available individually defined thing, since at the end of the contract, the borrower had to return the same thing in integrity [10, p. 127].

Apparently, definition of the generic object and individually identified belongings led to various legal consequences of their destruction or loss. If the individually determined thing was lost, the agreement did not meet the opportunities discussed above, and, as a result, terminated, there could be only compensation, but not the duty in kind. As for the fungible things specified in the contract, the performance did not stop even if in case of losing things by debtor.

Current legislation, unlike the Roman private law, does not set requirements for the degree of individualization of the subject contract. Although at present things as objects of civil rights are divided into individually identified and generically defined, this is a general provision of civil law and does not depend on whether things are the object of ownership or treaty. Normally, modern contract law is not much similar as it was in Roman private law regarding the differentiation of legal consequences of breach of contract, depending on the type of thing which was their object.

In this regard, the article 607 of the Civil Code of Ukraine contains quite abstract and not detailed provisions that obligation ceases its inability to perform due to circumstances for which neither party is responsible. Regarding specific cases of this provision, the court obviously has to be guided by the matter of reasonability provided in Article 3 of the Civil Code of Ukraine. For example, if as a result of fire in one field barley crop was destroyed, we should first find out whether the supplier of barley has another field in the same quantity and the same quality. This will determine the ability to perform the contract. At least, this logic guided the Roman lawyers, differentiating the possibility of obligation in the event of destruction of the appropriate subject matter depending on the type of things [5, p. 56].

Besides, the essential term of fee-based contracts for the Roman private law was the price, but the approaches to the understanding of Roman jurists differ. In this regard, D. Dozhdiov notes that classical Roman private law was unknown to the requirement for a fair price (listum pretium). Only in the times of Emperor Diokletian, there was the opportunity to withdraw from the contract if the price was lowered by more than half. The purchaser could keep the contract by offering a fair premium to the price [3, p. 570].

Let us illustrate the understanding of the prices of contract of sale, which was the most widely known and used among contractual structures of Roman private law. I. Novitskyi said that it was impossible to conclude a purchase contract without agreeing prices relative to the subject, and therefore, it was an essential part of this agreement [10, p. 136]. As you can see, for a long time, the contract price somehow had been fuelled in the contract, including purchase and sale as its essential condition. So it should have been discussed during the sale of goods. It seems that nowadays, when the civil law embodied principles of justice, determining the price of reimbursable contracts are needed, so the price should be seen as an essential term of these agreements.

Roman private law regulated a term of as the contract condition. The literature indicates that the Romans understood the additional expression, which limited the effect of the contract in time. It is necessary to distinguish between the initial and final term, and depending on the contract, it was determined at what point the transaction would lead to legal outcome (ex die), and from which point it loses strength (ad diem) [3, p. 570].

Understanding the essential terms of the contract in the Middle Ages and in modern times is not significantly different from those foundations that were laid in the Roman private law and considered above. Given this, and given the limited scope of the research, this issue will be considered in this work.

Significant impact on the understanding of essential terms of the contract in modern civil law of Ukraine was made by the Russian Empire. However, despite the relatively long duration of Ukraine within the Russian Empire, it should be noted that the Ukrainian contract law preserves its identity and characteristics. Thus, contract law of Hetman era was regulated by the collection of provisions titled “Rights for Lawsuits for Ruthenia” in 1743. This collection established, in particular, the order of conclusion, modification and termination of contracts, determined the conditions of their effect and so on. For the contract to be effective, agreement on the subject and the possibility of its implementation was necessary. Contracts that contained obscene conditions, contrary to law and justice, or signed under duress, like the promise of parents to give something for their children, were considered invalid. In interpreting contracts, strange or questionable conditions had to be interpreted in favour of the debtor but not the creditor [7, p. 49].

Regarding the fee-based contracts in pre-revolutionary Russian law, there was the opinion that the balance of payments as an essential term of the agreement appears not only an object (thing or right), but also the price. Thus, the contract price of the loan, as a term of the contract, not only had determined, but was limited by law as the maximum interest rate under the contract could not exceed 6% per year [8, p. 248]. Thus, we see that pricing as an essential term of the contract attached great importance to the pre-revolutionary legislation. The legislator not only pointed the binding prices for individual contracts, but also aimed to protect the weaker party. Thus, in the Russian pre-revolutionary civil and commercial law, along with the subject, the price was recognized as an essential condition of fee-based contracts.

Regarding the concept of ‘essential terms’, it is clear that in pre-revolutionary Russian law, it was not applied. However, the law and special literature of that time used such phrases as ‘essential elements’, ‘essential features’, ‘essential part’. When it was about ‘terms’ meant causa, that was the reason or circumstance of contract. So, G. Shershenevych noted that the condition includes the anticipated effects of the transaction, which are dependent on the occurrence or non-occurrence of certain future circumstances. Thus, this transaction is called conditional [12, p. 122]. In modern law, the term ‘terms’ continues to apply to causa, as well as the terms of the contract, including essential ones. Thus, in modern law, the concept of ‘contract terms’ has an expanded meaning. This modern legal category of ‘essential terms of the contract’ has no direct relation to causa.

In Soviet times, the term ‘essential contract terms’ began to be applied only after 1950s. Prior to this civil science, civil law specified ‘essential parts’, ‘essential elements’, ‘essential features’ of contracts.

Thus, the first Soviet civil law term ‘essential terms’ is not used, but instead the term ‘essential items’ was used. In particular, Article 130 of the CC RSFSR in 1922 claimed that the contract concluded is recognized when the parties expressed consent regarding all the essential points in the form required by the law. In the same article, it was also indicated that essential elements included subject of the contract, price, term, and all those items in respect of which the preliminary statement of the parties must help to reach an agreement. Thus, unlike the current civil legislation of Ukraine, the list of essential terms of contract in the first codification of the Soviet civil legislation was broader and included price and term. This approach of the Soviet legislator can hardly be called perfect, because the condition for some contracts on the price and / or term contradicts their legal nature.

In 1950s, K. Grave and I. Novitskyi wrote that “a fee-based contract, price is called an ‘essential condition’” [6, p. 269]. However, at the same time, the other scientists began to use the term ‘essential terms’ of the contract. Indeed, S. Bratus in 1951 notes that price is an essential condition of any contract [1, p. 12].

It should be noted that the term ‘essential contract terms’ has been widely used in civil science during and especially after the codification of civil law, that happened in the Soviet Union in the early 1960s. The result of this codification in Ukraine was the adoption of the Civil Code of the USSR in 1963, which had been apllied till the end of 2003. Since then, this concept has been used in academic civil studies unanimously [2, p. 362].

 

References:

1. Bratus S. N. Soviet civil law: in 2 vol. Vol. 2 / S. N. Bratus. – М., 1951. – 496 p.

2. Civil law of Ukraine: in 2 parts. Part. 1. / Ed. А. А. Pushkin, V. М. Samoilenko. – Kharkiv, 1996. – 448 p.

3. Dozhdiov D. V. Roman private law / D. V. Dozhdiov. – М., 1999. – 784 p.

4.Dudchenko D. The theory of contract: regarding the history of origins and reasoning / D. Dudchenko // Modern issues of adapatation of civil legislation to the EU standards. – Lviv, 2006. – p. 102-104.

5. Zazuliak І. І. Essential contract terms: theoretical aspect: dissertation … candidate of legal studies : 12.00.03 / І. І. Zazuliak; Kharkiv National University of Internal Affairs. – Kharkiv, 2009. – 172 p.

6. The course on the Soviet civil law. Separate types of obligations / All-Soviet Union Institute of legal studies of the USSR Ministry of Justice. – М., 1954. – 356 p.

7. Matvieieva Т. О. The law of Hetman Era (18th century) / Т. О. Matvieieva // The Academic Journal of the Kherson State University. Legal Studies Series. – 2013. – Vol. 5. – Т. 1. – p. 48-52.

8. Meier D. I. Russian civil law: in 2 parts. Part 2 / Meier D. I. – М.: Statute, 1997. – 455 p.

9. Merezhko А. А. Contract in private law / А. А. Merezhko. – К., 2003. – 176 p.

10. Novitskyi I. B. Roman law / И. Б. Novitskyi. – М., 1995. – 248 p.

11. Khutyz М. Kh. Roman private law / М. Х. Khutyz. – М., 1995. – 172 p.

12. Shershenevych H. F. The Russian civil law textbook / H. F. Shershenevych. – М., 1995. – 556 p.

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